Coeur Mining, Inc. (CDE) Q2 2016 Earnings Report, Transcript and Summary

Good day, and welcome to the Coeur Mining Second Quarter 2016 Financial Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Ms. Courtney Lynn, Vice President, Investor Relations and Treasurer. Ms. Lynn, the floor is yours ma’am.

Thank you, and good morning. Welcome to Coeur Mining’s call second quarter earnings conference call. Our results were released after yesterday’s market closed and a copy of the press release and slides for today’s call are available on our website. Before we get started, I’d like to remind everyone that our press release and certain of our comments on the call include forward-looking statements from which actual results may differ. Please review the cautionary statements included in our press release and presentation as well as the risk factors described in our latest 10-K and 10-Q. I’ll now turn it over to Mitch Krebs, President and Chief Executive Officer.

Thanks, Courtney, and good morning, everybody. Thanks for joining our call. We reported very strong financial and operating results yesterday. I’d say the most gratifying quarterly results in the five years that I’ve been CEO of this company. Our performance reflects the progress we’ve made in revamping the company, its operations and its culture to position Coeur for long-term success. The second quarter is a testament to the hard work and solid execution by our employees of the strategic plans we laid out three years ago. They also provide even further evidence of our ability to consistently deliver on our commitments. While we still have more work to do in executing our strategy, I’m certainly pleased to see our production growing, our costs both operating and non-operating continue to drop, declining debt levels and our earnings now turning positive. And I’m particularly pleased to see our free cash flow shift to positives sooner than anticipated. The rise in silver and gold prices since the beginning of the year has provided a strong tailwind for the entire industry, but our steadily improving cost performance and solid execution quarter-in and quarter-out are really starting to set us apart. A major milestone was achieved during the second quarter when we received the record of decision from the BLM allowing us to begin the next leach pad expansion at Rochester, which we expect to be completed by this time next year and will further extend the mine life. We’re also extremely pleased to have now satisfied the obligations of the old gold royalty agreement held by Franco-Nevada on Palmarejo as of July 26. Beginning in August, we are shifting to the more favorable terms under the renegotiated gold stream agreement which should have a significant positive impact on the company’s cash flow going forward. Just a few highlights I’d like to point out before opening up the call to questions. On the production front, overall production levels were up strongly 19% higher compared to the first quarter. Palmarejo silver equivalent production rose 34% due to higher grades and more tons coming from underground mining out of Guadalupe and a small amount from Independencia. Slight 10 in the presentation materials illustrates these trends over the past few quarters as we’ve successfully transitioned Palmarejo to a 100% underground mining. Rochester silver equivalent production increased 31% due to higher mining rates mostly and Wharf’s production was up 34% over the first quarter, thanks primarily to the fresh ounces that were loaded on the pad 2 earlier in the year. In terms of cost, our overall cost per ounce was down by double digit yet again, and that’s on the heels of strong cost reductions in our first quarter as well. Slide six and seven do a good job of showing these consistent reductions and trends that now stretch back over the past three years. The biggest drop in the second quarter was Palmarejo where adjusted cost applicable to sales were down 19% to $8.24 for silver equivalent ounce; at Rochester where they were down 8% to $10.43 an ounce and Wharf where they were down 20% to $534 per gold equivalent ounce. Our G&A which has come down by about 45% over the last couple of years was down 11% quarter-over-quarter and 13% year-over-year. In terms of financial highlights, obviously we are proud to report positive quarterly earnings. Net income in the quarter was $14.5 million and adjusted earnings were $17.3 million. Adjusted EBITDA nearly doubled from $36.8 million in the first quarter to $72.4 million in the second quarter. And on a trailing 12 month basis, adjusted EBITDA stood at $171 million. Free cash flow defined as operating cash flow less CapEx, less payments to Franco-Nevada was $12.2 million during the quarter and is expected to decline throughout the remainder of the year. We’ve been pointing deposited expected free cash flow in the second half of 2016 so it’s great to accomplish that a quarter or two earlier than planned. On the balance sheet, we ended the quarter with cash of $258 million and then subsequent to the end of the quarter, we paid off the $100 million term loan which reduced our total debt to nearly 20% and annual interest expense by about $9 million, and brings considerably more flexibility to our balance sheet. Taking this repayment into account, our total debt to adjusted EBITDA now stands at 2.5 times versus 5.9 times just a year ago. Slide eight illustrates these trends of lower debt, rise in EBITDA and a rapid decline in our leverage statistics over the past several quarters. Lastly, just a couple of comments on the impact of our recent acquisitions, as you know, we were more active than most over the past couple of years and those additions are now paying off handsomely. The Wharf mine which we acquired for just under $100 million about 17 months ago has already returned nearly 60% of the acquisition cost and free cash flow and is on track for a fantastic year. Slide 15 shows what our team has been able to do at Wharf in terms of mining rates, costs and cash flow since closing that acquisition early last year. And then at the Independencia underground deposit at Palmarejo, which we consolidated through the acquisition of Paramount gold and silver a little over a year ago, we’re well in our way to achieving a mining rate of 1,000 tons per day by year end this year, which will then become a second major source of high grade ore along with Guadalupe and help lead to what should be a huge 2017 at Palmarejo. As we look forward to the second half of the year, we’re well on track to deliver our full year production and cost guidance. Our year-to-date costs are running below our full year guidance ranges, assuming these trends continue in the third quarter, we’ll need to take a look at revising downward our cost guidance which would be great, but we’ll leave it alone for now and see how the next three month goes. We do plan to increase our exploration spending during the second half of the year by about $8 million, a little less than half of this amount will be expensed exploration to try and add new resources at Kensington and Palmarejo in high probability areas. It will also fund some earlier stage exploration programs on properties in Nevada and Mexico that make up a part of our longer term pipeline that we have assembled over the past couple of years. The remainder of that $8 million of additional exploration spending will be capitalized and will focus on accelerating the conversion of existing high quality resources to reserves at Palmarejo, Rochester and Kensington. We also plan to bump up our capital expenditure level during the second half of the year by about – an additional $10 million. About half of that amount will be used to accelerate the work on the stage IV leach pad expansion at Rochester now that all the permits are in hand. We expect the total cost of that expansion to be somewhere between $40 million and $45 million, the majority of which will be spent next year in 2017. The other half of that $10 million additional CapEx expenditure in the second half will be used to create another portal into Guadalupe from the south along with funding the ongoing development work at Jualin at Kensington. As pleased as we are about the second quarter and the year so far, we really do consider this to be just the beginning. We’ve invested about $60 million at Rochester over the past two years to achieve the higher mining rates and greater efficiencies we’re only now starting to see. We’re investing over $40 million at Palmarejo to transition to higher grade, higher margin underground mining as you could see in the most recent quarter. Slide 9 and 10 in our presentation materials do a good job of illustrating this significance of this transition. But the full impact of these investments at Palmarejo really should start to be seen next year when Independencia starts to ramp up above 1,000 tons per day. In the meantime, our drilling result at both Guadalupe and Independencia make us feel very optimistic about the long-term potential of Palmarejo. We’re also investing about $40 million at Kensington to drill and develop significantly higher grade gold ounces there. But that’s not expected to start impacting Kensington’s production, cost and cash flow until late next year. Even without that future expected benefits of the higher grade ore, our team has been able to bring down Kensington’s cost by nearly half. In 2012, cost per ounce there were over $1,300 an ounce versus $740 an ounce in the most recent quarter. In terms of just getting started, 2016 is the first full year of having worst low cost production and free cash flow in the portfolio which is making a big difference. Even our strategy we began implementing late last year at San Bartolome to purchase higher grade ore is only now starting to have the intended benefit. If you look at slide 16, you can see exactly when we implemented this approach when cost dropped down by about $2 an ounce. As a result, San Bartolome generated $15 million of free cash flow in the first half of this year. When stakeholders ask, what’s next for Coeur after seeing how far we’ve come over the past couple of years? There is no shortage of initiatives to point to that are high returns, high impact and well advanced. I know I speak for everyone here when I say that we are pleased with our second quarter results and that we remain focused on delivering the many components of our strategy that still lie ahead of us. That’s the extent of our prepared comments. Let’s go ahead then and open it up for any questions.

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions]. The first question we have comes from Joseph Reagor of ROTH Capital Partners. Please go ahead.

Good morning guys and congrats on another great quarter.

Hey, thanks Joe.

So couple questions on the guidance side, I guess first on the CapEx side. If I look at what you guys spent year-to-date versus guidance, it seems like you’re trending towards the lower end if not below the lower end of guidance. Is there particular mines that have larger CapEx spends in the backhalf of the year that we should be modeling in?

Let’s say that -- you’re right, the run rate to the first half of the year trends toward if you extrapolate that out to the full year to the lower end of the guidance. Now so much of our CapEx is underground development and then second to that is the capitalized exploration. A lot of that capitalized exploration spends really only got going kind of in the second quarter, so that will accelerate throughout the rest of the year. And in terms of the underground development, it’s likely to stay pretty static. We’ll see then this pick up obviously at Rochester as we get going on stage IV expansion, actually we’ve already started the work out there. Frank is there anything I’m leaving out in terms of capital that would be more backend weighted?

No, as you said the drivers of the underground mine developments are capitalized drilling. Those carry the lion share of the spin.

Does that answer your question, Joe?

Yeah, yeah, that’s helpful. And then on the cost in the production side, you kind of hinted around the Q3 results will determine whether or not the cost guidance needs to come down, but also on gold production, it looks like based on the way the mines play out throughout the year, looks you guys you got a trend towards the high end of that number as well. What’s the basis for remaining cautious here? Is it the concern that may be the US dollar will reverse a little bit and that will impact some of the international mines or can we peg the caution to?

Yeah, it’s not as cerebral as that, it’s more what we consider ourselves to be at half time here at the end of June. We’re really pleased with the way the first half has gone. We expect the second half to go as well, but we also don’t want to be in the position of moving guidance around from quarter to quarter. We rather see a little bit more time go by here into the second half of the year, hopefully these trends will continue and then we’ll be in a position in our third quarter results to drop things down on the cost side and may be to your point Joe, take a look at the gold guidance range at that point once we’re further down the track. And that’s really all there is to it.

Okay, and then one final one if I could, after the $100 million of that repayment early this quarter, do you guys have a long-term target for debt to EBITDA that you guys want to get to and then maintain? And once you were to get there, do you think that you guys would start to think about paying a dividend or basically what would you do with cash once you get there?

Joe, it’s Peter and certainly our target would be total leverage of around two times and we’re getting close to that target and really manage the capital structure around that, certainly focused on hopefully improved credit rating and therefore improved cost of that as well. And in terms of paying a dividend that’s certainly something we would absolutely aspire to as we kind of mature the company and capital structure having a rational return of capital to shareholders is something that we have certainly talked about and would like to implement. But most importantly on that, we want to make sure that it’s a sustainable dividend and a meaningful dividend as opposed to just a token, tip of the hand kind of dividend. So certainly in terms of our long term strategy, return of capital is something that we think about for sure.

Okay, great. Thanks for taking the questions.

Thanks, Joe. Take care.

Next we have Chris Thompson, Raymond James.

Good morning guys, $2 billion company and one of the few outperforming gold stocks or silver stocks in my universe today. Congratulations.

Thanks, Chris.

Couple of questions here really, I know you’ve mentioned a little bit about cost and may be looking to bring down the cost guidance in the Q3. What operations do you think can potentially beat as far as cost guidance, Mitch?

That’s a may be a trick question, Frank’s giving me a glare. I’ll start and then Frank can chime in. I’ll say the obvious one, for good reason I think is Palmarejo and we’re running well below there, but you kind of have to go back and put yourself in our shoes. In December, in November when we were going through the budget cycle and thinking about the year ahead in 2016 at Palmarejo, there’s a lot going on and a lot of moving parts. Some of the things quite frankly we didn’t know exactly how they’d play out throughout the year. We’re running at mill intermittently, what would be the impact be of that on cost and recoveries and things like that through the first six months, turns out that the guys are managing that really well and the results reflect that. And so I think if we can continue that path at Palmarejo, that’s the one that I think has the – is trending far enough below to where we’d probably start with that one in terms of making any changes. Frank, A, would you agree with that, and B, are there any others that come to mind?

Yeah, Palmarejo fits that picture. I think also at Kensington we’re through the midpoint of the year, we’ve done quite well looking to the second half of the year we know – forecasting for certain maintenance expenditures. So – Palmarejo as well, which may offset some of what we may ultimately achieve this year at Palmarejo. This is related to maintenance that will be incurred on our mobile fleets. Wharf now that we’re on the low end of guidance range as well, but the nature of the way we operate that – balancing out between mining, loading pads and unloading pads, we’ve got 3 million tons of unloading to do in the second half of the year, that’s not done for free and I think we estimate that was between $0.25 and $0.30 a ton. So that’s coming as well. So I expect to see these mines cost creep up slightly but stay within the guidance range at the end of the year.

Okay, great. Thanks. You just mentioned some dollars on CapEx to accelerate for the development of Guadalupe with another portal. I mean what is the reason for that? Is that improved operational flexibility or is that to facilitate a potential increase in – rate there?

Well it’s both, Chris, that Guadalupe mine strikes north to south and we’ve been working it from the north end. We’ve got mining zones and their box A, B, C, D and E and we’ve been focused so far in A, B and C. We’ll be transitioning over to D and then in the next year. But we want to strike from the south and start heading so that we can connect the whole mine that will just simply open up some additional phases that will provide for higher mining rates a little bit earlier than what our previous plans have allowed for –been focused on.

Okay, great.

Chris, I’d add to that one is. Ventilation will be dramatically improved and that will also help improve productivity and then secondly, I know there are some areas to that south end that with this portal in there, it will open up a whole another area for underground drilling that we’re really keen to get into and hopefully keep extending Guadalupe then to the south end and east and this portal will facilitate that work.

Great. Thanks. And just quickly if you can, what were the mining rates, the mining costs I guess and I’m going to say the word Independencia, how do they compare those for Guadalupe?

You did it, Chris, you said it. Go ahead, Frank.

We currently projected that will be quite similar to what you’re seeing in our reported results at Guadalupe, something in the mid $40 per ton range.

Right, thanks. Just quickly moving on then, San Bart’s here, 30% of the ore is purchased, do you see that continuing at that sort of rate?

It’s something that we need to keep very focused on and it’s a little bit of a different business that we’re in there doing that. So there are things like a competitive element there with other people who do seek out to buy the same sources of ore that we do and so there are pricing strategies and we need to – and as the price of silver changes, those competitive dynamics change. But we feel like we’ve got enough sources tied up to keep that 30% ratio going forward for as long as we can see.

Okay, great. And then finally on Wharf, obviously production hinged to I guess the Golden Reward there, is production still weighted for the second half, because if it is, you guys are going to blow through guidance?

Yeah it is, we’ll see we’re mining in Golden Reward in the second quarter and we’ll continue to through the third quarter until we have to stop for the upcoming ski season. But we’d be getting some good grades out of our American Eagle pit as well.

Great. All right and then I think the previous caller touched on it, the focus is continual deleverage of the balance sheet, a reduction in debt?

Yes, Chris. Obviously as Mitch said in his prepared comments, the $100 million was a big step. And the key there with taking out the term loan B is the flexibility we have in continuing that deleveraging. So yes, we basically have that one large tranche of debt left: $380 million of the 7 7/8 bonds. And our focus would be on continuing to methodically deleverage.

Perfect. Guys, congratulations. Thanks.

Thanks, Chris.

Next we have Craig Johnston, Scotia Bank.

Yeah, hey guys. Thanks for taking my call. Congrats on a good quarter, pretty neat to be talking about potential dividends on a conference call when we look back to say three quarters ago what the focus was, so congrats. Just a couple of, clean up questions I think Chris covered a lot of the stuff I wanted to cover but at Palmarejo, underground mining costs blew my estimates out of the water at $33 a ton. Any color on what your expectations are going forward and may be what drove that to be so good this quarter?

Yeah, Craig, this is Frank. There is several factors going on in the mine itself. We’re actually mining in some areas where we’ve been able to increase the size of the stubs and that makes each one of those stubs more tonnage for the same activity level that goes into it and cost. So we’re getting some really good efficiency and additional tons at the same cost out of certain areas of Guadalupe. This is taking in play scenarios where ground conditions are better than others, you can run your stub just a little bit bigger, that’s been fantastic. We’ve also really kind of suddenly in the background that we have to haul that over back to the process facilities and we’ve really optimized the cost per ton calling that material back to the plant. We just, in addition to all of that, we’re just becoming much more efficient, our knowledge base of the mine itself has increased and we’re getting a lot better, getting that ore out of there at a lower cost.

That’s great. So going forward thinking in this range is a way we can think about it or what’s the best way for us to look at it?

Yeah, I expect what you’re seeing now to continue on throughout the remainder of this year at any rate.

Okay great.

Mining pattern change year over year but we’ll see what it’s looking like later this year.

That sounds great. Thanks, Frank. Some more question with Kensington as well, looks like mining cost came down arguably 20% and the best we’ve seen in the past five quarters. Just any color on what drove that?

Well it was a quarter where mine rate outstripped our processing rate. We ended up with a 20,000 tons of stockpile sitting in front of the mill which is good and bad I guess, we’ve got to work hard now through the remainder of the year to kind of back that mining rate up which ultimately you may see our cost per ton of mining – a little bit up. We need to increase our milling rates. And the reason we were holding our milling rates down, so we’ve been beneficiaries of good grade coming out of the mine against our internal plans and just didn’t have to mill quite as hard to achieve the results which is substantially ahead of mid-year.

Pretty good problems to have. Thanks, Frank. May be just a question for Peter, not a fun question on taxes but just trying to understand the movement in taxes this quarter, I guess just the reason being as we see a big kind of deferred income tax adjustment in the operating cash flow. Just trying to understand the current versus the deferred tax expense and kind of any movements within that.

Yeah, as always Craig, taxes for quarter complex area with a lot of moving parts. In terms of the current provision, probably the biggest driver on that was related to our non-core asset sales and the Mexican tax associated particularly with El Gallo sale drove that number to I think the total number was around $4 million. On the deferred tax provision, a couple of things that were driving that, we had an additional of FIN 48 accrual as well as some FX movements in Mexico that were driving higher numbers on that. But that’s kind of the high level summary and as you’re trying to model them, we’re happy to get on the phone and help you sort of with the more granular details of it.

Okay, no that’s perfect. Thanks, Peter. That’s it for me. Congrats against on a great quarter guys.

Thanks, Craig. Take care.

Next we have Jessica Fung with BMO.

Hi, good morning guys. Excellent quarter, don’t say that very often, so excellent quarter.

Thank you.

Okay, so couple of questions from me. In terms of your increased exploration expense, so not necessarily the capitalized exploration but on the expense side, you guys have listed guidance as well. Where is that going?

Hans, you want to cover that?

Yeah. Hey Jessica, this is Hans.

Hi.

Also moving into the winter program, we will probably do some expansion drilling on Vein 4 because we can do that literally from the camp and expand the vein to the south. You may recall we had some offset drilling we reported last year that was almost 1,000 feet from the resource, where we hit the same vein. And so we are going to try to infill that and get more certainty on the potential upside for Vein 4. So that’s where most of the expense drilling is going. We’re also just starting to ramp up our earliest-stage greenfields programs. We’ll drill one of our projects in the U.S. this year. We’ll get to one of our projects in Mexico in late like November once the monsoons stop. And we’re curating three more projects for drilling in the U.S. early next year. And then also we’ll have those – a lot of those ready to go in the next budget cycle.

Perfect. That’s great news, getting to the Greenfield sites. Second question I had is on hedging, can you remind us what your thoughts are in terms of hedging the metal prices?

Sure, it’s Peter, Jessica as you probably know or observe, we have no hedges in place at this point. It’s something that we’re continuing to monitor historically, we had about a third of our production hedged in the form of put spreads on the downside, really it returned to current metal prices is a relatively new thing our cost coming down. So really creating some margin to even talk about hedging is a relatively new thing as we deleverage, the urgency to do it is certainly less than it was than we were actively doing it between end of 2013 up until early last year. So it is something that we are continuing to monitor but have not pulled the trigger on yet.

Okay, perfect. And finally, sort of in line with some of the previous gentlemen’s commentary in terms of priority for your free cash flow that I think most people are expecting from you guys now. Obviously I think probably repaying some of the debt, debt is up there but I guess can you give us a sense of strategically where your priorities are? Do you want to do more exploration or do you feel like improving the balance sheet is up there and then again, where do dividends come if you could prioritize where you want your cash flow to go?

Yeah, it’s kind of a ranking driven by a basic rate of return criteria and for us, we take kind of an inside out approach, meaning we start by looking around our existing mines, what can we do, at our mines, around our existing mines in terms of incremental capital, incremental expansions or extensions to really leverage all of that big some capital that’s gone into these five mines that we operate. It’s hard to beat the return on Brownfield exploration especially at places like Palmarejo where we have so many targets, we’ve opened up some new areas to drill now with that tunnel that connects Guadalupe and Independencia. There is a lot that we can do and will do around Palmarejo to keep extending and expanding that new sort of new high grade underground reserve and resource. As you and Hans just discussed, we’ll spend a little bit more on the earlier stage end of the pipeline thinking about what’s next for us 5 or 10 years from now. And then sitting in the middle are these development projects strategic to forget that we have La Preciosa, and even Joaquin down in Santa Cruz Argentina both of which are quality projects and are both being looked at by our teams to see if there are more attractive, more economic ways of approaching those as sources of high return growth. And you start getting working all the way down the list in terms of relative rates of return, then balance sheet pops up in there and I think after you get past the de-levering conversation which Peter talked about is something that we can do opportunistically now that that term loan and those restrictions are gone. Then dividends become kind of the part where excess cash flow after all of those other things are taken care of can be allocated. I don’t know Peter did I miss anything?

I think you’ve covered it.

Okay, perfect. And last question, a little bit nitty-gritty on Rochester, so obviously the tons that you guys are placing were quite strong in quarter two. Is this mostly to do with the second crusher or are there other improvements that you guys have been making there?

Jessica to do with that expanded crusher, it’s performing well and adding to – the crush material and putting out on the plan. We have a primary crusher which is doing its job as it always has. We’re getting an additional roughly 15,000 tons a day out on the pads through the expanded pressure, little portable units. We’ve also campaigned fair bit of stockpile material as – mine material off to the pad in the second quarter as well.

Okay. Perfect. That’s it for me. Thank you very much guys.

Okay, thanks Jessica.

And next we have Mark of RBC Capital Markets. Please go ahead.

Yeah, thanks and good morning guys. Again, echoing everyone else’s comments but really nice quarter and nice to see you guys generating free cash flow earlier than expected. And again, I’m guessing towards the back end of it so lot of my questions have been answered, but a couple to pick a way yet. So first off you mentioned East Rochester and looking at it as part of an updated analysis of the broader Rochester operation, so can you just give some color on what you expect from that and how much of a contribution you could get of there?

Frank you start that and then Hans feel free to chime in, in terms of the exploration effects in East Rochester.

Yeah we’re attracted to the East Rochester research target because it’s showing all indications of some pretty decent grade out there for silver. Fundamentally, that’s why we’re chasing that. There are other areas of the pit that showed promises but it’s certainly high on the priority list, complete our drilling and get our geologic resources altogether, built in our reserve base as we move forward we hope.

Hans you want to cover the exploration angle of East Rochester?

Yeah, those are huge priority first half of our drilling program. So we completed the drilling, we should put together a compilation of all the drill results and now we’re going into our new sources and new reserves for Rochester year end. Not sure about the timing of news, but we have seen some good results that are consistent with the news release we put out earlier this year and so the things – get really well and just a matter of the economics whether it justifies – back east… it’s a great expansion for Rochester in terms of grade potential grade upgrade.

And Mark, it’s Mitch here. Just thinking about timing there, we just obviously got this POA what we’ve been calling POA 10 at Rochester over the goal line and we’ll be focusing on extending stage IV out there to provide us with more leach pad capacity but we’re already now starting on what we call POA 11. And POA 11 will take three to five years probably to complete and get that permitted and this East Rochester concept is something that we hoped to kind of fold into this next permitting cycle.

Great. Perfect. Thanks for the detail on that. And I guess touching on La Preciosa, you guys had mentioned potentially looking at project update sometime later this year, is that still on track and have the results been as positive as you were hoping you could get something out of?

The team down there has been doing a really good job. We’re kind of reevaluating that project, it’s funny they started that may be a little over a year ago and without a lot of fan fair or attention or us bothering them, and now the level of calls and enquiries and hey, how’s it going? How’s it looking, have definitely picked up. They are scheduled to be in here next month to report on what their work is looking like, so we’ll see what that looks like we hope we might be able to see is kind of lowered smaller tonnage, higher grade lower capital scenario there at La Preciosa but we’ll just have to see what we learn. If that does look interesting and then probably be a need to do some drilling in 2017 to kind of confirm and validate a few things and then we go from there. But we’ll start from the update next month and we’ll report back when we get on our third quarter call with you all.

Okay, perfect. Hopefully – 25 or 30 by then and it will be a no brainer.

Yeah there you go and make it easy.

Okay, that’s it for me. Again, great quarter. Thanks guys.

Thanks a lot, Mark.

Chris Thompson, Raymond James.

Sorry guys, I just missed a quick question, it was touched on earlier I apologize I missed the comments there. But the tons – at Rochester, obviously higher than anticipated in the Q2, what is the plan? Is the plan to maintain that sort of loading rate there towards the end of this year extending into next year?

Well Chris, we’ll back off to more historic mining rates that we’ve seen in the past, roughly around 50,000 tons a day being mined and placed out on the pads. We did that in the second quarter because we have a really long leach curve at Rochester for silver, so we wanted to get it out there a large – out there on the pad early in the years possible to take advantage of that in the second half. The real back – in those mine rates are.

And finally, Joaquin the little project you have in Argentina, what’s the sort there at the moment?

It’s Frank. We’re also evaluating that at the moment, taking a look at it, we’re refreshing our geologic model, taking a look at all the drilling results and so on and trying to see what by the end of the year what sort of opportunity may exist there.

Chris, I think – 50 million ounce close to 60 million ounce resource the average grade on an ounce to ton basis is between 4-5 ounces per ton, near surface, lot of potential to expand that with some more work. Obviously we worked there about 60 kilometers south of there for about a decade when we ran that little Martha mine which we’ve since mined out and have now sold. But it’s still sitting there like Frank said, we’re blowing the dust off of it and taking a fresh look to make sure we have a solid understanding of how that could fit in to our plans going forward.

Great guys. Thank you.

You’re welcome Chris.

At this time, I’m showing no further question. We’ll go ahead and conclude the question-and-answer session. I would now like to turn the conference back over to Mr. Mitchell Krebs for closing remarks. Sir?

Yeah okay. Thanks everybody for your time this morning. Our team delivered a great quarter and I want to thank everyone for their commitment and hard work. We’re excited about where the company is going and look forward to speaking with you again this fall to discuss our third quarter results. So have a great day and thanks again.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.